7 Smart Personal Finance Moves for Military Personnel Before Deployment

Military mother in uniform saying goodbye other daughter.

You and your family already have enough on your mind when you are preparing for deployment. You don’t want to worry about financial issues, too. Fortunately, you do have access to some special programs while deployed that can help your finances long after you return.

8 Smart Financial Moves to Make in 2017 If You're in the Military

Your paychecks grow when you receive tax-free income in a combat zone, and you can take advantage of special programs that help you stretch your money even further. It’s also important to protect yourself from identity thieves while you’re gone and be ready for unexpected bills. The more you prepare, the better you’ll be able to protect your family and your finances.

Sean Michael Pearson, a certified financial planner with Ameriprise in Conshohocken, Pa., has been in the Pennsylvania Air National Guard for 19 years. He recommends doing a periodic “financial exercise,” similar to a military exercise, to make sure you and your family are prepared financially for deployment. That way you don’t have to scramble if you get a last-minute call to deploy—as he did when he went to Iraq in 2003.

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Here are some steps you can take well in advance of deployment, and a few immediately before:

Organize Legal Documents

The legal assistance office at your base can help you create a will, as well as a power of attorney and healthcare proxy, which let someone handle your finances and healthcare decisions if you are unable to do so yourself.

The power of attorney can be particularly important while you’re deployed. You can grant a general power of attorney, which gives your representative broad powers over financial transactions. Or you can use a power of attorney for specific transactions, such as buying a house or car while you’re deployed. A power-of-attorney document generally has a time limit, so make sure yours is still up to date if you’re about to be deployed again.

Also, check your beneficiary designations on your life insurance, IRAs, Thrift Savings Plan and other retirement savings because these directions supersede any information in your will. If you designated a beneficiary when you first joined the service and haven’t changed it since you got married, for example, your original beneficiary could inherit your account.

Saving for Retirement When You're in the Military

See legalassistance.law.af.mil to find a legal assistance office near you.

Prepare Financial Records

Put together a “brain book”—a compilation of key information that might be needed in your absence, recommends Patrick Beagle, a former Marine helicopter pilot and now a financial planner. Give a trusted family member or friend information about your financial accounts and how to access them, as well as a copy of your will, power of attorney, medical directive and a letter of instruction should anything happen to you.

Establish an Emergency Fund

It’s always important to have an emergency fund, and it’s particularly crucial if you are about to deploy. Try to build up enough cash in an accessible account to cover at least six months’ worth of expenses, and add extra money to help your spouse pay for help while you’re gone, such as for yard work or childcare.

Create a Bill Paying Plan

If you don’t have a spouse or family member at home to pay your bills, sign up to have your bills paid automatically from your checking account. “You need to have a system that’s going to work no matter where you are,” says Pearson. “Easy is better.”

It’s also a good idea to notify your bank, credit union, credit card companies and other financial institutions about your deployment. You don’t want them to freeze your account temporarily if they can’t reach you with questions about charges from an unexpected location.

Save on Auto Insurance

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Let your auto insurance company know if you’re about to be deployed and won’t be using your car. You may be able to lower your premiums by up to 75% while deployed by eliminating liability and collision coverage on the stored car, if permitted. But keep any comprehensive coverage, which will pay if your car is damaged or stolen.

Cancel Contracts

As mentioned previously, the Servicemembers Civil Relief Act provides special rights while you are deployed. You have the right to terminate an apartment lease without penalty if you have orders for a permanent change of station or are deployed to a new location for 90 days or more. You can terminate a car lease without an early termination fee if you are deployed for 180 days or longer. And you can terminate your cell-phone contract without penalty if you receive orders to relocate for more than 90 days to an area that is not supported by your contract.

Go to servicemembers.gov for more information.

Take Advantage of Extra Savings Opportunities

Your take-home pay will increase while you’re receiving tax-free income in a combat zone, making it the perfect time to take advantage of special savings opportunities that are only available while you’re deployed. Here are three special breaks:

Higher Thrift Savings Plan limits. Instead of the usual $18,000 limit, you can contribute up to $53,000 when receiving tax-exempt pay while serving in a combat zone. It can be tough to reach those limits, but you may be able to boost your contributions at least a little when your take-home pay rises. Any tax-free pay that goes into the TSP can also be withdrawn tax free. For more information, see tsp.gov.

Totally tax-free income in a Roth IRA. If you’re receiving tax-free pay in a combat zone and contributing to a Roth IRA, both your contributions and your earnings come out tax free. You can contribute up to $5,500 to a Roth IRA in 2016 (or $6,500 if 50 or older).

Guaranteed 10% returns on savings. Invest up to $10,000 in the military’s Savings Deposit Program and receive 10% annual interest, compounded quarterly, while you’re deployed and up to three months after you return. You can’t contribute to the plan until you’re deployed, so brush up on the rules in advance. That way, you can act promptly when the opportunity arises. Also consider saving some money beforehand, so you can contribute as much as possible. See the Department of Defense's Savings Deposit Program page for more information.

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As the "Ask Kim" columnist for Kiplinger's Personal Finance, Lankford receives hundreds of personal finance questions from readers every month. She is the author of Rescue Your Financial Life (McGraw-Hill, 2003), The Insurance Maze: How You Can Save Money on Insurance -- and Still Get the Coverage You Need (Kaplan, 2006), Kiplinger's Ask Kim for Money Smart Solutions (Kaplan, 2007) and The Kiplinger/BBB Personal Finance Guide for Military Families. She is frequently featured as a financial expert on television and radio, including NBC's Today Show, CNN, CNBC and National Public Radio.